The 'i's have it: the small Apple guns for Windows

With two new machines and Mac sales rising, the company is reaching out for converts. Stephen Pritchard reports

Steve Jobs looks to have done it again. The man who came back to Apple, launched the iMac PC and iPod music player and saved the company from what had seemed an irreversible slide into oblivion last week announced a couple of radical new products smaller and cheaper than anything Apple has made before - but which could dramatically grow the brand.

Speaking at the MacExpo show in California last week, Mr Jobs unveiled a low-cost portable music player, the iPod Shuffle. At £69, this is based on Flash memory rather than the iPod's miniature hard disk, so holds fewer songs. But the technology allows Apple to go after the low end of the market, currently dominated by companies such as iriver and Creative.

More significant still, though, was the much-rumoured announcement of the Mac Mini. This small, square box comes without a screen or keyboard. It also comes at a very keen price: £339 for the simplest version in the UK (though Americans can buy it for $499, or £265). Analysts have gone as far as describing the Mini as a "disruptive" technology, and one that could give Apple a foothold in corporate computing.

Mike Davis, senior research analyst at Butler Group, says banks could be tempted to buy the machine as a low-cost, compact alternative to Windows computers or terminals from firms such as Wise. Apple's operating system allows companies to disable external ports and even the hard drive, making the machine extremely secure. Other businesses pushed for space, such as retailers, might be drawn to the Mini.

But Apple will hope that the machine sells in quantities to home users too. The Mini even comes in a neat box with a carry handle so buyers can take it home with ease. It is this sort of design touch that Apple's rivals try to copy, but rarely manage with as much flair.

The Mini is designed to appeal to computer users who have a screen and keyboard already. Some will be Mac users who are upgrading, but the real goal is to win over customers of Microsoft's Windows.

There is evidence that this had started to happen even as the Mini was still in the design labs. Apple's latest quarterly results, also released last week and covering the Christmas season, showed Mac shipments were up 26 per cent on last year. While analysts had expected Apple to announce strong iPod sales, the boost to the Mac business was more surprising.

It seems Apple's computer business is benefiting directly from iPod sales. "The 'halo' effect [of PC-owning iPod users moving to Macs] seems real to me," says Ted Schadler, principal analyst for consumer technology at Forrester Research.

In addition, some of the problems that are affecting other parts of the IT industry also appear to be working to the benefit of Apple. Macs are, for now at least, not as attractive to virus writers and spammers as Windows machines.

IT experts also point out that the Mac operating system is inherently more secure. "Microsoft and its partners will struggle to improve Windows against viruses and spam until Longhorn [the next version of Windows], and that is two years away. In the meantime, Windows customers might move to a Mac because it's safer," suggests Mr Schadler.

Apple did disappoint some, though, by not launching a com- puter with features like hard disk video recording (PVR) built in. It will sell a connector to allow the Mac Mini to use a TV as a monitor, but the company is content to leave features such as video recording to third parties.

"It was a conscious decision to keep the Mini clean," says Mr Davis at Butler Group. He adds that it comprises tried and tested, rather than cutting-edge, parts so it is cheap and easy to build; limiting features will also limit Apple's support costs.

And the Mini could well prompt a whole family of new, third-party accessories. The iPod economy already consists of hundreds of accessory makers, and the latest companies to add iPod support are the car makers: Mr Jobs announced deals with Volvo, Nissan and Mercedes-Benz at MacExpo.

Mr Schadler predicts that companies such as Kodak, Bose, Griffin and Sony could develop "iLife" appliances, the name for Apple's suite of consumer digital media software programs which also received an update at MacExpo.

Bose already makes iPod accessories, and Sony's president, Kunitake Ando, joined Mr Jobs on stage at the Expo. Sony has worked with Apple before - the Japanese company made some of Apple's earliest PowerBook portables - and one of Mr Ando's previous posts was as head of Sony's Vaio PC division.

In San Francisco, Mr Ando was fulsome in his praise for Apple's software, and the two companies are working together to develop the market for high-definition (HD) digital video. Apple and Sony would make a powerful partnership in the home entertainment world, where Intel and Windows-based media PCs have so far failed to make much impact.

Motorola is building mobile phones with support for Apple's iTunes jukebox software, and Hewlett-Packard licenses the iPod. Around 7 per cent of iPod sales in the last quarter were HP branded. Apple is clearly no longer as averse to licensing its technology as it was when Mr Jobs returned to the company.

It is a tantalising prospect and certainly enough to keep the Mac rumour sites - one of which was sued for its pre-Expo reporting - busy for some time.